Bodie, Alex Kane Alan Marcus | 9781260772166
,Chapter 1: The Investment Environment
Q1. Which of the following is a financial asset?
A. Machinery
B. Land
C. Bonds
D. Patents
*ANSWER** C – Bonds
RATIONALE Financial assets represent claims on real assets or
income streams (e.g., bonds, stocks). Land, machinery, and patents are
real assets.
Q2. Which market participants are typically net suppliers of capital?
A. Corporations
B. Households
C. Governments
D. Banks
*ANSWER** B – Households
,RATIONALE Households usually supply capital by saving and
, investing, while corporations and governments are net demanders.
Banks act as intermediaries.
Q3. Which of the following best describes the agency problem?
A. Mispricing of securities
B. Conflict between managers and shareholders
C. Risk of default in bond markets
D. Poor diversification of portfolios
*ANSWER** B – Conflict between managers and shareholders
RATIONALE The agency problem arises when managers pursue
personal goals rather than maximizing shareholder wealth.
Q4. Which of the following is a real asset?
A. Stock
B. Corporate bond
C. Factory building
D. Treasury bill